Iran has approved a 35% wage increase for the Iranian year starting March 20, despite opposition from labor representatives who walked out of a meeting of the Supreme Labor Council in protest.
The decision was announced Tuesday after a marathon meeting that started a day earlier, setting the minimum monthly wage for workers at 111 million rials -- or about $185 at today’s exchange rate. The Labor Council includes government, business and labor representatives.
Given the devaluation of the national currency, the minimum wage for the upcoming Iranian year effectively stagnates, resulting in minimal purchasing power for wage earners and a decline in the living standards for millions of workers. The purchasing power of Iranians is undermined by the rising value of the US dollar in Tehran, which stands at about 610,000 rials, with prospects of further depreciation looming in the upcoming year.
According to Deputy Labor Minister Ali-Hossein Ra'yatifard, Iran has over 15 million industrial and service sector workers, about 17 percent of the country’s population.
Additionally, the increase is significantly lower than the inflation rate in Iran, which the government-controlled central bank says is 43%. The inflation rate for food items is much higher, with the figure hitting about 80 to 100%. Inflation began to soar to 40% in 2019 after the United States imposed economic sanctions on Iran. The cumulative effect of five years of high inflation has impoverished tens of millions of Iranian wage earners. Over the past six years, the rial has fallen 15-fold.
Labor representatives walked out of the Supreme Labor Council session and refrained from signing the final resolution of the council. They had called for a 50% increase in the minimum wage, arguing that the current level is not enough to cover basic living expenses. They also criticized the government for failing to address other issues affecting workers, such as the lack of job security, low levels of unionization, and the high rate of accidents in the workplace due to a lack of safety regulations.
Within Iran's state-controlled economy, the government sets wages for public sector workers, including thousands of companies and factories, which also determines salaries of ordinary workers in the private sector. According to the law, representatives of the government, official labor unions and employers every year negotiate to set the minimum wage. However, the government increasingly ignores the unions and pushes through unrealistically low wages amid a nearly 50-percent annual inflation.
Ahmadreza Mo’ini, a labor representative at the Supreme Labor Council, stated that both the government and employers disregarded the demands of workers during negotiations, prompting labor representatives to leave the session in protest.
Ali Khodayi, a labor activist and dismissed member of the Supreme Labor Council, supported the decision of labor representatives to leave the council session, stating that according to the Labor Law, workers' wages should increase in proportion to the inflation rate.
The workers proposed a minimal rate of 195 million rials ($325) but the government keeps rejecting it, Nader Moradi, workers and retirees’ union activist, said earlier in the week, further adding, “If we take into account such items as housing and education, the minimum livelihood basket for working families stands at 300 million rials (around $500).”
The government, however, defended the increase, saying that it was the highest in the past three years, disregarding the soaring inflation in recent years and the freefall in the rial’s value. The government says that it has taken into account the economic situation of the country and the need to protect jobs, arguing that higher wages make employers lay off workers or employ them without contracts.
Last week, Mohammad Reza Tajik, the head of the Workers' Assembly of Tehran Province, warned that “wages of workers are always one year behind inflation,” leaving millions struggling to make ends meet. He added that even a 100% wage hike would fail to bridge the gap between wages and living expenses for the working class.
Persistent inflation and a sluggish economy have propelled millions of Iranians into the category of "working poor," with reports indicating that wages cover a mere 60 percent of monthly household expenses. A myriad of factors contribute to the continuation of low wages in Iran, including economic mismanagement, corruption, and international sanctions.
All in all, the government’s decision for a smaller raise in salaries is likely to further anger workers, who have already been staging protests in recent years over low wages and poor working conditions. Labor activist Hassan Sadeghi said Tuesday that "We should brace ourselves for a 67% inflation rate next year and further depreciation of the national currency as well as an imminent increase in prices of gasoline and other energy carriers,” warning of further protests in the upcoming year.